"Whatever measurement that you take, our Hispanic owner-operators outperform the general market in quality, sales, profitability, involvement. They are truly leaders. That is the key to success in this scenario, is that doors needed to be opened. But today, they perform significantly stronger than the rest of the community," said Ralph Alvarez, chief operations officer, McDonald's USA.
Underlying the numbers is a business model that forms a vast network of support. First, however, owner-operators must undergo a stringent selection process and obtain their own financing for their restaurants.
McDonald's then provides extensive training, including a weeklong class at McDonald's University in Illinois. The company also provides local and national support in operations, training, advertising, marketing, real estate, construction, purchasing and equipment. It also works with key institutions to help successful owner-operators who want to expand find financing at competitive rates, and helps identify and source products and services for franchisees.
One of the premier successes of the McDonald's Corp.'s incubation process is John Lopez, chairman of Lopez Foods, who began with McDonald's as an owner-operator with one location in downtown Los Angeles. Eventually, Mr. Lopez grew his operation to four sites. Recognizing Mr. Lopez' successes, McDonald's facilitated a discussion between Mr. Lopez and one of the company's beef suppliers about a possible acquisition.
Mr. Lopez eventually bought the company and changed its name to Lopez Foods. Today, Mr. Lopez' company has surpassed middle-market status to rank No. 11 on the Hispanic Business 500 directory of largest Hispanic-owned businesses, with revenues of $400 million last year. It supplies hamburger, pork, and Canadian-style bacon for a large part of the McDonald's U.S. restaurant chain.
Mr. Lopez credits McDonald's with being an "angel" investor, providing opportunities for him to gain access to capital with investors that understood the food-supply business.
But even with such increased campaigns, regulatory and public policy rules can inhibit capital access for Hispanic middle-market companies. "It is the policies that are going to break down the barriers," said George Muñoz, co-founder and president of Muñoz Investment Banking Group.
For example, Mr. Muñoz noted that the securitization of the home mortgage industry led to a surge in access to home ownership. "There was a great revolution with the securitization of mortgages. It eased the market for Hispanics because the laws changed," he said, noting that the process could also be applied to business loans. Securitization would allow lenders to pool their small-business loans into a security that could be sold to a third party, reducing banks' credit risk by providing liquidity and freeing them to make additional loans – increasing the size and scope of investment in the U.S. Hispanic market.
Mr. Nogales of Nogales Investments said changing underwriting criteria for some entrepreneurial financing vehicles would help. "If you have a broader criteria and better understanding of Hispanic business, you're more likely to invest in that business," he said.
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